Lloyd’s annual report 2011 LLOYD’S VISION FOR 2025 TO BE THE GLOBAL CENTRE FOR SPECIALIST INSURANCE AND REINSURANCE LLOYD’S ANNUAL REPORT 2011 Lloyd’s One Lime Street London EC3M 7HA Telephone +44 (0)20 7327 1000 Fax +44 (0)20 7626 2389 www.lloyds.com OUR BUSINESS LLOYD’S ACCEPTS BUSINESS FROM OVER 200 COUNTRIES AND TERRITORIES WORLDWIDE Our licences in over 75 jurisdictions, supported by a network North America Europe Central Asia & Asia-Pacific of local offices, ensure access to insurance markets large Lloyd’s has offices in Atlanta, Chicago, Lloyd’s has full-time country managers Lloyd’s has offices in Australia and Hong Frankfort KY, Los Angeles, New York, supporting Lloyd’s market development Kong (SAR). In addition, Lloyd’s has three and small. Toronto and Montreal and is represented activities in Benelux, France, Germany/ trading platforms to access business in in the US Virgin Islands by an attorney Austria, Iberia, Ireland, Italy, Poland, China, Japan and Singapore. in fact. Nordic Area, Switzerland and the UK. Latin America Africa Lloyd’s has an office in Brazil with co-located Lloyd’s has a full-time country manager syndicates to access reinsurance business. in South Africa. LLOYD’S total business by region LLOYD’S class breakdown by region 12 Central Rest 8 US & Other United Asia & Asia- of the Canada Americas Kingdom Europe Pacific world TOTAL 5 Reinsurance 29% 76% 29% 37% 48% 60% 38% 41 Property 31% 7% 18% 15% 13% 8% 21% Casualty 19% 7% 18% 16% 28% 10% 18% 18 Marine 7% 5% 6% 19% 6% 9% 8% 16 US & Canada UK US & Canada 41% 18% Europe Energy 10% 3% 3% 7% 3% 3% 7% United Kingdom Europe 16% Central Asia & Asia-Pacific Motor 1% 1% 24% 2% 0% 2% 5% Other Americas Central Asia Rest of the world & Asia-Pacific Aviation 3% 1% 2% 4% 2% 8% 3% Rest of 12% the world 5% All Classes 41% 8% 18% 16% 12% 5% 100% Other Americas 8% LLOYD’S in numbers all underpinned by… 88 186 200 94% 97% 324 Syndicates Brokers Countries and territories Of the FTSE 100 Of dow Jones Years of underwriting of specialist underwriting daily creating insurance which covers… and… industrial average companies experience The cover and text pages of this report are printed on Amadeus 50% recycled Silk, a recycled paper containing 50% recovered waste, 50% virgin fibre experience and talent solutions in over… and is certified as an FSC mixed sources grade. Amadeus 50% recycled Silk is manufactured to the certified environmental management system ISO 14001. Designed by Addison www.addison.co.uk. Printed by Park Communications Ltd. Lloyd’s is a registered trademark of the Society of Lloyd’s. © Lloyd’s 2012 Lloyd’s Annual Report 2011 OUR BUSINESS LLOYD’S ACCEPTS BUSINESS FROM OVER 200 COUNTRIES AND TERRITORIES WORLDWIDE Our licences in over 75 jurisdictions, supported by a network North America Europe Central Asia & Asia-Pacific of local offices, ensure access to insurance markets large Lloyd’s has offices in Atlanta, Chicago, Lloyd’s has full-time country managers Lloyd’s has offices in Australia and Hong Frankfort KY, Los Angeles, New York, supporting Lloyd’s market development Kong (SAR). In addition, Lloyd’s has three and small. Toronto and Montreal and is represented activities in Benelux, France, Germany/ trading platforms to access business in in the US Virgin Islands by an attorney Austria, Iberia, Ireland, Italy, Poland, China, Japan and Singapore. in fact. Nordic Area, Switzerland and the UK. Latin America Africa Lloyd’s has an office in Brazil with co-located Lloyd’s has a full-time country manager syndicates to access reinsurance business. in South Africa. LLOYD’S total business by region LLOYD’S class breakdown by region 12 Central Rest 8 US & Other United Asia & Asia- of the Canada Americas Kingdom Europe Pacific world TOTAL 5 Reinsurance 29% 76% 29% 37% 48% 60% 38% 41 Property 31% 7% 18% 15% 13% 8% 21% Casualty 19% 7% 18% 16% 28% 10% 18% 18 Marine 7% 5% 6% 19% 6% 9% 8% 16 US & Canada UK US & Canada 41% 18% Europe Energy 10% 3% 3% 7% 3% 3% 7% United Kingdom Europe 16% Central Asia & Asia-Pacific Motor 1% 1% 24% 2% 0% 2% 5% Other Americas Central Asia Rest of the world & Asia-Pacific Aviation 3% 1% 2% 4% 2% 8% 3% Rest of 12% the world 5% All Classes 41% 8% 18% 16% 12% 5% 100% Other Americas 8% LLOYD’S in numbers all underpinned by… 88 186 200 94% 97% 324 Syndicates Brokers Countries and territories Of the FTSE 100 Of dow Jones Years of underwriting of specialist underwriting daily creating insurance which covers… and… industrial average companies experience The cover and text pages of this report are printed on Amadeus 50% recycled Silk, a recycled paper containing 50% recovered waste, 50% virgin fibre experience and talent solutions in over… and is certified as an FSC mixed sources grade. Amadeus 50% recycled Silk is manufactured to the certified environmental management system ISO 14001. Designed by Addison www.addison.co.uk. Printed by Park Communications Ltd. Lloyd’s is a registered trademark of the Society of Lloyd’s. © Lloyd’s 2012 Lloyd’s Annual Report 2011 Lloyd’s annual report 2011 LLOYD’S VISION FOR 2025 TO BE THE GLOBAL CENTRE FOR SPECIALIST INSURANCE AND REINSURANCE LLOYD’S ANNUAL REPORT 2011 Lloyd’s One Lime Street London EC3M 7HA Telephone +44 (0)20 7327 1000 Fax +44 (0)20 7626 2389 www.lloyds.com 01 Contents Financial highlights 03 Chairman’s statement 04 About Lloyd’s 05 How Lloyd’s works 07 02 Governance 11 Lloyd’s to Welcome Chief Executive Officer’s statement 17 2011 Business highlights 18 Key performance indicators 2011 20 Business environment 22 Risk management 25 16 overview Strategic Three-Year Plan 28 International reach 29 People strategy 30 Corporate social responsibility 33 2011 Market performance review 37 Risk and uncertainties 43 Reinsurance 45 Property 46 Market performance Market 36 Casualty 47 Marine 48 Energy 49 Motor 50 Aviation 51 Statement of Council’s responsibilities 53 Report of Ernst & Young LLP to the Council of Lloyd’s on the 2011 Lloyd’s pro forma financial statements 53 Pro forma financial statements 54 52 Notes to the pro forma financial statements 57 Security underlying policies issued at Lloyd’s 65 Market results Market Introduction 69 Financial highlights 70 Corporate governance 71 Internal control statement 80 68 Report of the Remuneration Committee 81 Report of the Audit Committee 89 Report of the Lloyd’s Members’ Ombudsman 91 Financial review 92 report Society Statement of the Council of Lloyd’s responsibilities in relation to the financial statements 97 Independent auditor’s report to the members of the Society of Lloyd’s 98 Society of Lloyd’s financial statements 99 Notes to the financial statements 104 Five year summary 136 Appendix – Managing agents and syndicates 137 Lloyd’s Annual Report 2011 Glossary of terms 139 02 WELCOME TO LLOYD’S WELCOME TO LLOYD’S Lloyd’s Annual Report 2011 2011 AT A GLANCE 03 Financial > Lloyd’s made a loss before tax of £516m (2010: £2,195m Highlights profit) and a combined ratio of 106.8% (2010: 93.3%). This result reflects the frequency and severity of natural catastrophes throughout the year and the continuing Lloyd’s to Welcome low interest rate environment > Gross premium income £23,477m (2010: £22,592m) > Central assets maintained at record levels of £2,388m (2010: £2,377m) The pro forma financial statements (PFFS) are Gross written premium RESULT BEFORE TAX prepared so that the financial results of Lloyd’s and its members taken together and their net £m £m assets can be compared with general insurance companies. The PFFS include the aggregate of 2007 16,366 2007 3,846 syndicate annual accounts (Aggregate Accounts), 2007 16,366 2007 3,846 overview Strategic members’ funds at Lloyd’s (FAL) and the Society 2007 16,366 2007 3,846 2008 17,985 2008 1,899 of Lloyd’s financial statements. 2008 17,985 2008 1,899 2008 17,985 2008 1,899 2009 21,973 2009 3,868 2009 21,973 2009 3,868 2009 21,973 2009 3,868 To read more on our financial results 2010 22,592 2010 2,195 see page 37. 2010 22,592 2010 2,195 2010 22,592 2010 2,195 2011 23,477 2011 (516) The Aggregate Accounts are reported as 2011 23,477 2011 (516) a separate document and can be found 2011 23,477 2011 (516) at www.lloyds.com/financialreports £23,477m £(516)m £23,477m £(516)m CAPITAL, RESERVES AND SUBORDINATED CENTRAL ASSETS* DEBT AND SECURITIES £m performance Market £m 2007 14,461 2007 1,951 2007 14,461 2007 1,951 2007 14,461 2007 1,951 2008 15,264 2008 2,072 2008 15,264 2008 2,072 2008 15,264 2008 2,072 2009 19,121 2009 2,084 2009 19,121 2009 2,084 2009 19,121 2009 2,084 2010 19,121 2010 2,377 2010 19,121 2010 2,377 2010 19,121 2010 2,377 2011 19,114 2011 2,388 2011 19,114 2011 2,388 2011 19,114 2011 2,388 £19,114m £2,388m £19,114m £2,388m RETURN ON CAPITAL COMBINED RATIO* % % results Market 2007 29.3 2007 84.0 2007 29.3 2007 84.0 2007 29.3 2007 84.0 2008 13.7 2008 91.3 2008 13.7 2008 91.3 2008 13.7 2008 91.3 2009 23.9 2009 86.1 2009 23.9 2009 86.1 2009 23.9 2009 86.1 2010 12.1 2010 93.3 2010 12.1 2010 93.3 2010 12.1 2010 93.3 2011 (2.8) 2011 106.8 2011 (2.8) 2011 106.8 2011 (2.8) 2011 106.8 (2.8)% 106.8% (2.8)% 106.8% * See Glossary on page 139.